Italy’s government has approved an increase in the annual flat tax applied to income earned abroad by new fiscal residents in an effort to address criticism from locals. The annual fixed fee will double to €200,000, up from €100,000 previously. The tax arrangement, informally known as the “billionaires” tax or “the footballers scheme,” has been criticized for spiking house prices as rich expats buying property in Italy took advantage of the tax incentive. High-profile individuals like Cristiano Ronaldo have benefited from this system.
While the tax was initially meant to attract wealthy individuals to boost the Italian economy, Economy Minister Giancarlo Giorgetti emphasized that Italy is now against engaging in a fiscal competition with other countries to offer tax breaks to the super-rich. The doubling of the flat tax is also seen as a way to help Italy reduce its budget deficit, which exceeded the EU’s target last year, leading to a disciplinary procedure by the European Commission.
Critics of overly beneficial tax breaks for the wealthy point out that they can increase inequality, undermine public services, and create regional imbalances. The OECD and the IMF have discouraged countries from engaging in a “race to the bottom” in terms of fiscal incentives. The impact of the tax increase on Italy’s revenue remains uncertain, but it is a step towards addressing the concerns raised by local residents and improving the country’s financial situation.
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